Executive Pay limitation!

Forums: Politics, Economics, Obama, Bailout, Executive Pay
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About damn time.

http://www.nytimes.com/2009/02/04/business/04pay.html?hp

Quote:

The Obama administration is expected to impose a cap of $500,000 for top executives at companies that receive large amounts of bailout money, according to people familiar with the plan.

President Obama and Treasury Secretary Timothy F. Geithner will announce the executive compensation plan on Wednesday at 11 a.m.

Executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends.

The new rules would be far tougher than any restrictions imposed during the Bush administration, and they could force executives in the months ahead to accept deep reductions in their current pay. The proposed cap comes amid rising public fury about huge pay packages for executives at financial companies being propped up by federal tax dollars.

Executives at companies that have already received money from Treasury Department would not have to make any changes. But analysts and administration officials are bracing for a huge wave of new losses, largely because of the deepening recession, and many companies that have already been to the trough may well be coming back.

It's been pretty frustrating, reading the complaints from these fat cats that they're going to lose lots of money this year, b/c of this and b/c of the failure of their business models.

Well, tough ****. Time to re-adjust your expectations, assholes.

Executive pay as a whole is a huge problem here in America. I've discussed this with several here before who seem to believe there's nothing wrong with having exorbitant executive compensation; I think that attitude is 100% wrong and our current financial crisis is proof.

Having multi-million, tens of millions of dollars even, of compensation per year engenders a situation where executives are encouraged to take bigger and bigger risks with the company. When just two or three years of pay is enough to set you up for life, why wouldn't you take those risks?

Our current system protects these jerks from being held personally responsible for the poor business decisions that they make; and their personal wealth is too great to make losing their job be any sort of threat. Hell, under such a system you'd be a fool not to take ever-increasing risks with your company's investments and operations.

Here's an NPR audio link I encourage you to listen to:

http://www.npr.org/templates/story/story.php?storyId=100174138

Just a short sample -

Quote:

Lowenstein: [this corporate culture] pays out too much for success. ... it's routine now, when you hire a CEO, you pay him ten or twenty million before he's hung up his hat and done a day's work. When Andrew Carnegie had a bad year in his steel mills, he suffered for it. That's the outrageous thing. These managers don't ride up and down with the fortunes of the people who invested the money, which is the whole idea of capitalism.

Time we turned that around.

I am unswayed by the threats that the business managers and CEOs are going to jump ****. Bullshit. They have nowhere to go and they can all be replaced. It isn't as if they have displayed extraordinary competence as it is.

Cycloptichorn

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@Cycloptichorn,

Cycloptichorn wrote:

About damn time.

Why hire top executives and pay them top dollar for their performance when you can hire less
experienced, mediocre, wanna-be executives that will not perform nearly as well as top executives?

With lower pay comes lowered expectations.

PrezBO is the epitome of an inexperienced, mediocre, wanna-be executive and it shows.

Forget executive pay caps and move forward with term limitations.

http://www.athenswater.com/images/PrezBO.jpg

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Of course, the President is already subject to term limitation. In fact, the only national provision for term limits is on the office of President.

While i do think executives are paid way too much, this is a purely cosmetic measure, and is not dissimilar to calls for the limiting of or rolling back of wages to union employees. The pay of either union employees or of executive suite employees is a very small fraction of the cost of an automobile, to use a glaring recent example. Calling for limits on the pay of union employees or of executive employees has more to do with ideology than it does with reality.

1 Reply

The way I understand it, the pay limits are not for every executive, but rather only those of companies putting their hands out for TARP funds. Those in need of TARP funds are NOT competent and deserving of millions of dollars in compensation. If they were, they wouldn't have bankrupted their companies.

The funds being used to pay these outrageous bonuses belong to the taxpayers of this country. They are not being paid from corporate profits.

I wouldn't be in favor of limiting all CEO pay. But, if they come to the public trough... yeah.

1 Reply

@Cycloptichorn,

NICE!

So, after the shareholders boot these losers out of the company, they won't be able to hire any REAL expertise to dig these companies out and turn them around...expertise that these companies need right now.

No "quality" executive will accept the amount of work, effort nor the risk(legal and career wise) to try and turn these firms around for this dollar amount.

But, the bums that are there already (the ones whose incompetence created this mess), they will probably take this pay cut because they can't get a job anywhere else.

Cool, more of the same...job security for the idiots!

Great idea Obummer!

2 Replies

@BigTexN,

The concept seems to make some sense.

In your example you state why would anyone work for that kind of money?

Well, part of Obama's idea is to reward excess income over 500K with stock options that need to be held for a period of time.

If you go to work for Citibank for example as their new CEO, with the stock now at $5.00 or whatever, and due to your expertise, you turn it around, what might that stock price be when you can sell them, $50...$75.00?

Give the CEO an equity interest as opposed to a non equity interest and then maybe the culture will change.

I support the spirit of the idea.

1 Reply

@Woiyo9,

But long term stock options do nothing for short term legal liabilities...unless there is protection against the current CEO being held accountable for the sins of the past.

Als0, long term stock options don't pay so well if the company goes belly up...a very likely possibility.

Just ask the folks in Silicon Valley how well their internet startup incentive stock options paid out! People out there took jobs with little or no pay in exchange for (surprise!) long term stock options. Those stock certificates make GREAT wallpaper! You can even still buy those certificates on EBay.

I agree with you that I like the spirit of the idea but its implementation will be garbage.

I like the idea of world peace but its likelihood is slim and none...like this idea.

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@BigTexN,

As I said, I support the spirit of the idea.

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@Woiyo9,

So, whats his point for making this statement? To feel good that he said something?

There are lots of ideas that I agree with the "spirit' of but their implementation is way worse than the problem.

I don't get it...which makes me worry about his executive inexperience.

Why didn't he just come out and say "I am considering working with Congress to pass a bill that everyone gets an income of a million bucks a year while outlawing inflation at the same time. We will see the end of hunger in the U.S. before the end of the year!"?

Great idea...I support the spirit of it...stupid, naive statement though..

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Quote:

No "quality" executive will accept the amount of work, effort nor the risk(legal and career wise) to try and turn these firms around for this dollar amount

This arguement reminds me of that knucklehead preacher Oral Roberts saying Jesus was going to call him home if people didn't send him 8 million dollars.

1 Reply

@BigTexN,

BigTexN wrote:

Als0, long term stock options don't pay so well if the company goes belly up...a very likely possibility.

So, you're saying pay the executives more because their leadership is likely to make the company fail? This doesn't make much sense to me.

1 Reply

@Cycloptichorn,

So I guess the question now is, can you get qualified (and effective) people to run these companies for $500k/year? I don't know the answer to that, but I think it alters the basic business model in a very interesting way.

Just how hard is it to run one of these companies and make the "right" decisions? It could be argued that the existing managers didn't make the right decisions so they weren't qualified even at the high prices. On the other hand, most of them were extremely effective at playing by the rules of Wallstreet.

Ultimately I feel that if Tax Payer money is used to support the company, that we deserve the same place on the board of directors as any other investor and we have the right to push for changes to internal management (including salary offerings). However, we have to realize what we are essentially doing, which is to become part of management for these companies. And if that's the case, then the government is going to need to assign a representative to sit at the board of directors meetings and represent the interests of the public/government, and that's a huge change to the business model.

I'm not sure where all this leads.

1 Reply

@DrewDad,

Assuming that the company is on the rocks...no person with real expertise will work to try to turn it around if their main pay is long term stock options that pay out, if and only if, the executive succeeds.

Remember, the prospective executive who would accept this deal would be agreeing to do so BEFORE they take the job, see the books and discover what cancer lies within...

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@squinney,

squinney wrote:

The way I understand it, the pay limits are not for every executive, but rather only those of companies putting their hands out for TARP funds. Those in need of TARP funds are NOT competent and deserving of millions of dollars in compensation. If they were, they wouldn't have bankrupted their companies.

The funds being used to pay these outrageous bonuses belong to the taxpayers of this country. They are not being paid from corporate profits.

I wouldn't be in favor of limiting all CEO pay. But, if they come to the public trough... yeah.

I'm with squinney.

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Shoulda found some way to make it retroactive.

You are correct when you said:

Quote:

I've discussed this with several here before who seem to believe there's nothing wrong with having exorbitant executive compensation

There are some conservatives here so wedded to their ideology...they would think there is nothing wrong with 1% of the people owning 99% of the country's wealth.

What a pathetic ideology is American conservatism.

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@boomerang,

Quote:

This arguement reminds me of that knucklehead preacher Oral Roberts saying Jesus was going to call him home if people didn't send him 8 million dollars.

Lets try putting it this way, Boomerang...

Doctor, I have cancer.

I'll hire you for $10 to go in and cure me. If I survive 5 years and I am cancer free, I'll pay you a million bucks.

If you have the number for any dumbass doctor who would take this deal, let me have it!

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@BigTexN,

An executive knowledgeable enough to bring such a company back from the brink is going to make sure he/she knows the full story before taking the job.

Please, stop giving our state a bad name.

1 Reply

@BigTexN,

Quote:

Remember, the prospective executive who would accept this deal would be agreeing to do so BEFORE they take the job, see the books and discover what cancer lies within...

I doubt that very much.

Quote:

... no person with real expertise will work to try to turn it around if their main pay is long term stock options that pay out, if and only if, the executive succeeds.

The very characteristic that supposedly defines conservatives and they wouldn't be lining up to do the job right.

You know, personal responsibility and all that.

1 Reply

@BigTexN,

All hat, nothing in the gourd.

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@BigTexN,

BigTexN wrote:

No "quality" executive will accept the amount of work, effort nor the risk(legal and career wise) to try and turn these firms around for this dollar amount.

In that case, let's have American companies outsource their executive layer to India. Five hundred kilobucks a year may not be much in the United States . But for Indians, I think, amounts in this neighborhoods still count as real money. Plenty enough to pay for quality executives.

2 Replies

Executive Pay limitation!

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